Did Lenovo's operating margin in China drop in the first quarter?
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LENOVO 1ST QUARTER FY15-16: TOUGH MARKETS, SOLID RESULTS .... Nevertheless, in the face of financial results that did not meet expectations, Lenovo is ... In the smartphone business, our strategic shift from China to the rest of world has paid off. .... Operating profit margin was 1.5 percent, a 1.9 points decrease ..
HONG KONG, August 13, 2015 – Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced results for its first fiscal quarter ended June 30, 2015. Quarterly revenue was US$10.7 billion, a three percent increase year-over-year. First quarter pre-tax income decreased 80 percent year-over-year to US$52 million. Net income declined 51 percent year-over-year to US$105 million.
Lenovo saw severe challenges in its main markets. It faced significant declines in the global PC and tablet markets, as well as slowing growth and increasing competition – especially in China – in smartphones. There were macroeconomic challenges in Brazil and Latin America and large currency fluctuations, intensifying competition, which hurt Motorola’s profitability in particular. Finally, Lenovo saw a rapidly shifting technology demand landscape in the enterprise business.
Despite this tough environment, Lenovo continued to deliver solid results. Its PC business reached record worldwide share of 20.6 percent. It gained share in every geography and achieved the # 3 position in the critical U.S. market, with record high share of 13 percent. Lenovo gained nearly one point of share and strengthened its #3 position in the tablet market. For the third consecutive quarter, the enterprise business had positive operating margin, before non-cash M&A-related accounting charges. In smartphones the company accelerated its shift from a carrier-focused business model in China to the open market in the rest of the world, which drove Lenovo brand smartphone volume outside China up 68 percent year-on-year.
Nevertheless, in the face of financial results that did not meet expectations, Lenovo is undertaking broad, decisive actions – including better aligning its businesses and significantly reducing costs – to return to profitable, sustainable growth and achieve its long-term goals.
"Last quarter, we faced perhaps the toughest market environment in recent years, but we still achieved solid results. Our PC business remained number 1 for the 9th straight quarter. In the smartphone business, our strategic shift from China to the rest of world has paid off. And our combined enterprise business achieved operational PTI for the third consecutive quarter," said Yuanqing Yang, Chairman and CEO of Lenovo. "But to build long term, sustainable growth, we must take proactive and decisive actions in every part of the businesses. We will further integrate elements of the acquisitions with our legacy businesses in Mobile and Enterprise, while building the right business model and cost structure. We will reduce costs in our PC business and increase efficiency in order to leverage industry consolidation increase share and improve profitability. We will come through these efforts as a faster, stronger and better aligned global company."